AIG posts solid Q3’24 result as higher catastrophe charges dent GI underwriting result

Global insurer AIG has reported a 77% year-on-year decline in net income to $459 million for the third quarter of 2024, driven primarily by a reduction in net income from discontinued operations following the deconsolidation of Corebridge, while its General Insurance (GI) business saw its underwriting result fall 28% on higher catastrophe charges and lower favourable prior year development.

While net income came down significantly from the $2.02 billion reported in Q3 2023, net income from continued operations decreased by 31%, from $694 million to $481 million in Q3 2024.

At the same time, adjusted after-tax income totalled $798 million for this year’s third quarter, up slightly on last year’s $746 million on the back of higher net investment income and improved results in Other Operations, somewhat offset by loss of earnings following the Validus Re sale and lower underwriting income in GI in the period.

Within the company’s GI business, gross premiums written (GPW) decreased 3% year-on-year to $8.6 billion and net premiums written (NPW) fell 1% to $6.4 billion, primarily as a result of the Validus Re divestiture. However, on a comparable basis, NPW grew 6% year-on-year on the back of 7% growth in Global Commercial, and 3% expansion in Global Personal Insurance.

Including Validus Re, the GI underwriting result decreased 28% year-on-year to $437 million in Q3 2024, or fell by 21% on a comparable basis, which AIG attributes to higher catastrophe losses and lower favourable prior year development, net of reinsurance and prior year premiums, when compared with Q3 2023.

All in all, catastrophe-related charges hit $417 million in Q3 2024, representing 6.9 loss ratio points, of which $324 million was in North America from windstorms and hailstorms, and $93 million was in the firm’s International segment.

Favourable prior year development totalled $165 million in Q3 2024, reflecting a 2.6 point loss ratio benefit, down from 2.7 points in Q3 2023. The firm highlights favourable development on short-tail lines in Global Specialty and U.S. Property and Specialty Risks which have performed well, and the amortization benefit related to adverse development cover.

The GI loss ratio increased from 59.6% to 60.7% in Q3 2024, with a GI combined ratio of 92.6%, up from last year’s 90.5%.

The GI segment’s adjusted pre-tax income decreased 11% year-on-year to $1.2 billion, with GI net investment income of $773 million is up 2% on last year’s $756 million.

Turning to Other Operations, and AIG has reported a 178% rise in net investment income to $125 million, while the segment’s adjusted pre-tax loss improved to $143 million from a loss of $278 million last year, driven by the higher investment income, lower general operating expenses, and lower interest expenses.

Group-wide, total net investment income for the third quarter of 2024 was $973 million, a rise of 14% from Q3 2023’s $856 million, reflecting dividends received from Corebridge, higher income on alternative investments, equity and fixed maturity securities and lower investment expenses, partially offset by lower income from loans in addition to a reduction in invested assets due to the sale of Validus Re.

“AIG delivered excellent third quarter financial results with strong profitability and growth across our businesses highlighting the quality of the underwriting portfolio and our ability to deliver consistent earnings. The adjusted after-tax income per diluted share was $1.23 for the third quarter, an 18% increase year-over-year, or 31% on a comparable basis. These results demonstrate AIG’s ability to consistently deliver underwriting excellence and capital management discipline and the successful execution of our priorities,” said AIG Chairman and Chief Executive Officer, Peter Zaffino.

“We continued to execute on our capital commitments with repurchases of $1.5 billion of common shares and dividends of $254 million in the third quarter. Through the first nine months of 2024, we have returned over $6 billion of capital to shareholders, reflecting our disciplined execution of our balanced capital management plan. We ended the quarter with an excellent total debt to capital ratio of 17.9% and parent liquidity of $4.2 billion.

“We achieved meaningful growth this quarter, led by our Global Commercial business. Third quarter net premiums written grew 6% year-over-year on a comparable basis†, driven by 7%† growth in Global Commercial Lines, which maintained very strong retention of 88% while adding $1.1 billion of new business. North America Commercial Lines achieved 11% growth with new business growth of 22%, led by Lexington Insurance which grew 24%. Global Commercial Lines pricing, which includes rate and exposure, increased 6% excluding Workers’ Compensation and Financial Lines, largely in line with loss cost trend.

“We marked another quarter of excellent underwriting results, building on top of outstanding performance over the past few years. The third quarter accident year combined ratio, as adjusted was 88.3%, demonstrating our underwriting discipline. The total catastrophe-related charges were $417 million for the quarter, representing 6.9 loss ratio points, and 4.9 points for the first nine months of the year. In a challenging catastrophe environment, this performance is remarkable, with industry insured losses expected to top the 2023 total of $125 billion.

“Through 2024 and beyond, we remain incredibly focused on underwriting excellence and executing on AIG Next. We have made substantial progress over the last several years to improve the financial strength of AIG. I want to thank our clients, partners and stakeholders for their trust in us, which is a direct result of the outstanding risk expertise and claims services provided by our dedicated colleagues,” added Zaffino.

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